The recession has broken many store owners of two retail habits that went from profit-killers to business-closers when the economy tanked two years ago: carrying too much inventory and poorly managing their cash flow.
“I’ve seen jewelers hold on to inventory for three to five years,” says David Peters, director of education for Jewelers of America. “These days, jewelers are more proactive about turning [it].”
When the crisis began in the fourth quarter of 2008, the first instinct for many retailers was to begin selling down their inventory to pay off debt and reinvest only in best-sellers and fast-turners. To quickly streamline their stock, retailers discounted, parted out, or scrapped nonperforming finished jewelry.
At the same time, store owners started to reevaluate, and perhaps end, their relationships with vendors. Those that were flexible and supportive during the bad times made the cut.
Plenty of retailers have made an even more significant change to inventory management by favoring virtual over “live” inventory. During Stuller’s 2010 Solutions Symposium in Lafayette, La., in early August, Shawn Montgomery, the company’s executive director of business development, told retailers: “Twenty linear feet of diamond bridal, diamond fashion, and color fashion would cost a retailer roughly $250,000 in live inventory. With prototypes, to fill that same amount of space with these three product categories would only be about $9,000.”
In the realm of cash flow, reducing inventory and accounts receivable has played a key role in managing downward an owner’s capital investment. Retailers are also more aggressively managing the flip side of cash flow, increasing accounts payable—especially paying off higher-interest debts and taking advantage of discount programs for early payments.
In step with these changes, jewelers are paying more attention to store traffic. “In the past, retailers were lackadaisical about the customers entering their store, not realizing the value of each opportunity they had to engage them,” says IAS Training president Brad Huisken. “Jewelers now know each and every customer is vital to their business.”
The smartest ones have recognized they can’t be all things to all customers. Now, many jewelers have identified their core strengths and are better leveraging their key inventory offerings and strategic services. This back-to-basics catharsis for store owners has had a knock-on effect on staff management, as more owners realize that simply “clerking” today’s better-informed customers just won’t do.